Payday Loan Reform In Canada? How About Us?
We don’t all have to agree on every regulatory detail pertaining to short-term lending but can we at least agree that payday loans are such a popular product because there is a demand for them? Why are so many consumer advocates dead-set on eliminating the industry in its totality, especially without any solutions for a comparable replacement product? Time and resources would be better spent by coming up with legislation that will better meet lawmakers concerns as well as determining why so many Americans are finding themselves in a situation in which short-term credit is now a must-have.
After much debate and discussion, the Canadian Province of Ontario legitimized the payday loan product by coming up with terms that were both consumer friendly as well as profitable for businesses. Although there are some parts of the legislation that may not be preferable to lenders in the states, it should be noted that the guiding principles are to be desired and Canada has made huge strides in the right direction. The principles that aided in guiding the legislation include 1)providing access to credit that will provide reasonable consumer protections while allowing a viable market to exist 2)harmonization to ensure consistency in legislation 3)moving slowly and cautiously to be sure that reasonable measures are implemented and assessed and 4)clear objectives with a documented understanding on an issue before decisions are made.
The Canadian Payday Loan Association or CPLA touched on a number of other subjects pertaining to the industry. One of the subjects highlighted is the limitations placed on the amount of money advanced. In the States, many laws and regulations that take effect focus on limiting how much a borrower can obtain during a specific time frame and some states have even created databases for the purpose of keeping track of PDL activity. The CPLA see’s this as a declination of access to credit and suggests that the burden of risk is the lenders and not the borrowers if the loan isn’t paid. The CPLA goes on to say that no lender can afford to make loans that are not repaid and should therefore be capable of creating their own lending criteria.
See http://cpla-acps.ca/english/submissions/CPLA%20response%20to%20Ont%20consultation%20paper%20July%206%2020 07.pdf for the full paper.
Great points, good info. Things are looking up for the payday loan industry in Canada.